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The Estee Lauder Companies Inc. EL reported first-quarter fiscal 2026 results, with the top and bottom lines beating the Zacks Consensus Estimate. Also, net sales and earnings increased year over year.
Adjusted earnings of 32 cents per share beat the Zacks Consensus Estimate of 16 cents in the fiscal first quarter. The bottom line rose 128.5% from earnings of 14 cents in the year-ago quarter.
The Estee Lauder Companies Inc. price-consensus-eps-surprise-chart | The Estee Lauder Companies Inc. Quote
The company's quarterly net sales of $3,481 million beat the Zacks Consensus Estimate of $3,384 million. The top line increased 4% year over year. Organic net sales gained 3% to reach $3,455 million, reflecting increases across all product categories, except makeup and hair care, and all geographic regions except the Americas.
Skin Care sales rose 3% year over year to $1,575 million, led by La Mer and Estée Lauder. Growth was driven by stronger Asia travel retail sales and innovations in key product lines, while operating income benefited from higher sales and PRGP cost savings.
Makeup revenues declined 2% year over year to $1,030 million, mainly due to lower Bobbi Brown sales and fewer eye product offerings. Operating results improved, driven by the absence of prior-year litigation charges, PRGP cost savings and reduced promotions, partly offset by higher marketing investments for new launches.
In the Fragrance category, revenues of $721 million increased 13%, led by strong growth from luxury brands Le Labo, TOM FORD and Jo Malone London. Gains were driven by successful product innovations, expanded consumer reach and continued demand for core collections like Another 13, Santal 33 and Wood Sage & Sea Salt.
Hair Care sales totaled $129 million, down 7% year over year, largely due to Aveda’s strategic pullback on promotions, store closures and salon channel softness, partly offset by new product innovation and its launch on Amazon’s U.S. Premium Beauty store.
Sales in the Americas fell 2% year over year to $1,174 million. Revenues in the Europe, the Middle East & Africa (EMEA) region broke even at $901 million. In the Asia-Pacific region, sales increased 9% to $873 million whereas in Mainland China sales increased 9% to $532 million.
Estee Lauder’s adjusted gross margin expanded 100 basis points year over year to 73.4%. This growth was primarily fueled by gains from the company’s Profit Recovery and Growth Plan (PRGP), improved procurement and reduced promotional activity, which more than offset inflation and currency headwinds.
EL reported operating earnings of $169 million compared with a loss of $121 million in the prior-year period. Excluding returns and charges related to restructuring and other activities, the operating earnings were $255 million compared with a earnings of $144 million a year ago. Adjusted Operating Income expanded 300 bps to 7.3%, driven by PRGP efficiencies that lowered non-consumer-facing expenses and supported consumer-facing investments.
This Zacks Rank #3 (Hold) company exited the quarter with cash and cash equivalents of $2,219 million, long-term debt of $7,320 million and total equity of $3,890 million.
The net cash flow provided for operating activities for the three months ended Sept. 30, 2025, was $340 million. Capital expenditures during this time amounted to $96 million.
In February 2025, Estee Lauder announced an expansion of the PRGP, including a comprehensive restructuring initiative aimed at transforming its operating model. The plan is set to be largely executed with completion expected in fiscal 2027, when the company anticipates realizing nearly all of the full run-rate benefits. The PRGP is designed to support a return to sales growth in fiscal 2026, restore a solid double-digit adjusted operating margin over the next few years and continue to mitigate the impact of external market volatility.
Estee Lauder anticipates incurring restructuring and related charges ranging from $1.2 billion to $1.6 billion before taxes as part of its PRGP. The restructuring initiative is expected to generate annual gross benefits estimated between $800 million and $1 billion, before taxes. As part of this effort, the company predicts a net reduction in positions of approximately 5,800 to 7,000. Through Oct. 26, 2025, $852 million in charges and over 4,000 position reductions have been approved, representing a significant portion of the program’s expected benefits and impact.
For fiscal 2026, the company reaffirms its full-year outlook. It is actively managing trade policy and tariff risks through mitigation strategies, including leveraging trade programs and optimizing regional manufacturing such as its Japan facility while enhancing supply chain agility, which is expected to offset more than half of the potential impacts.
The reported net sales are estimated to rise 2-5% compared with the prior-year level. The company’s adjusted organic net sales are also anticipated to grow 0-3% in the year. The adjusted earnings per share are likely to increase 26-39%, ranging from $1.90 to $2.10 in fiscal 2026.
EL stock has gained 4.3% in the past three months compared with the industry’s growth of 3.4%.
We have highlighted three better-ranked stocks from the staple sector, namely United Natural Foods, Inc. UNFI, PepsiCo, Inc. PEP and Ollie's Bargain Outlet Holdings OLLI.
United Natural is the leading distributor of natural, organic and specialty food and non-food products, currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
UNFI delivered an earnings surprise of 416.2% in the trailing four quarters, on average. The Zacks Consensus Estimate for United Natural’s current fiscal-year sales and earnings indicates growth of 2.5% and 167.6%, respectively, from the year-ago reported figures.
PepsiCo is one of the leading global food and beverage companies. It currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for PepsiCo’s current financial-year sales indicates year-over-year growth of 1.8%, whereas that for EPS suggests a decline of 0.6%. PEP has a trailing four-quarter negative earnings surprise of 1.1%, on average.
Ollie's Bargain is a value retailer of brand-name merchandise at drastically reduced prices and currently carries a Zacks Rank #2. OLLI delivered a trailing four-quarter earnings surprise of 4.2%, on average.
The Zacks Consensus Estimate for Ollie's Bargain’s current fiscal-year sales and earnings indicates 16.4% and 16.5% rallies, respectively, from the year-earlier reported levels.
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This article originally published on Zacks Investment Research (zacks.com).
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